E-commerce as a New Revenue Model: What Are the Advantages and Disadvantages?

E-commerce as a New Revenue Model: What Are the Advantages and Disadvantages?

Growth opportunities and golden mountains. These are expectations that entrepreneurs have when starting with a webshop, whether or not as a supplement to an existing business. Take two brothers in Drunen who decided to sell bracelets for men on the internet. This was not immediately a success in a first attempt in the Netherlands. But with the second attempt in Germany, it was soon a storm. The platform that contributed to the current success was Facebook. The turnover at Aurum Brothers is now (June 2016) at 300,000 euros per month.

E-commerce as a New Revenue Model

The advantages of an online earnings model

E-commerce offers companies opportunities to sell products and services to a wide audience, wider than in the offline world. The possibilities to be visible are infinite. In addition to its own website and webshop, there are sales platforms from third parties, such as Bol.com and Marktplaats, and finally, there are social media platforms and opportunities via sites such as WeChat. This visibility can also be a pitfall because this possibly leads to high marketing expenses. Nevertheless, the advantages of a webshop should outweigh the disadvantages. What are the benefits of the e-commerce earning model for, for example, trading companies?

Using various sales platforms offers more sales opportunities.

  • The possibilities to tap new customer groups are increasing strongly. For example, by personalizing articles / customized products.
  • E-commerce is a stick to automate various actions. This can reduce the amount of administrative work and errors. A good basic registration system is a must.
  • The customer experiences the receipt of online products as a ‘gift’. Packaging can, therefore, serve as a marketing expression and customer loyalty.
  • Play with margins. One product sells only with a low margin, but with a different product, it is best to calculate a higher margin.

Personalizing articles

The possibilities that e-commerce offers as a new business model to trading companies are inexhaustible. A development that is emerging is the personalization of articles. For example shoes or clothing. But there are also food-webshops where consumers can indicate with which ingredients they want to receive their food. In attendance are also web shops that offer a subscription, such as Spotify or book sales sites. These ‘Pay as You Go’ subscriptions give online shops the guarantee on certain earnings. However, large numbers of subscribers are often required. Leasing items is also a possibility. Lease jeans that come back, is then probably still sellable. With all these benefits applies: calculate, Calculate and analyze the revenue and expenditure and take into account the changing purchasing behavior of consumers wherever possible. Record all data thoroughly in one robust system that can easily share data with systems of chain partners.

The disadvantages of e-commerce

E-commerce not only offers opportunities. An entrepreneur who does not pay attention certainly also comes into contact with the disadvantages. More than with offline trade, it is important for e-commerce to draw up a clear strategy. It is also a prerequisite for a trading company to have a clear view of whether the promised articles can be delivered to the customer on time. The article must, of course, comply with the description. If this is not in order, the reaction of an online customer will have more effect on the success of the company than with a complaint from an ‘offline customer’. After all, the reaction is visible and can be shared on the internet. What are some of the major drawbacks or dangers of e-commerce?

  • Incorrect information about an item or stock height. This can lead to disappointments and bad reviews.
  • Financial problems due to incorrect mapping of shipping and return costs.
  • Especially the return costs can seriously affect profit margins.
  • Selling online on various platforms requires a matching investment in customer service systems and staff.
  • Offline customers who turn into online customers are much less forgiving.

Margins are small, so make choices. Take care of the logistics for one article group, hire a fulfillment partner for a different item group (logistic handler of webshop sales) or use drop-shipments (deliver directly from the supplier to customers).

Too much stock and the double feeling with returns

One of the biggest dangers of e-commerce is the persistence of too much stock. Offering a long-tail of products in a webshop is fun, but what is the turnover rate per item? Return items are a danger to profitability. Yet they can also offer opportunities. A web shop that allows consumers to return items, grows trust. If the consumer’s experience is good, he/she will return.

Glass half full? Start!

Trading companies that want to start a webshop should certainly do that. After all, seizing every opportunity that arises is also entrepreneurship. But the advice is to properly calculate the chance of a new business model. Set out a strategy, consider which sales channels are appropriate and take the first steps. This is possible with relatively small investments. Many online platforms such as CARTwise, Gladiator, Lightspeed, Magento and WooCommerce have already been developed. And you already have an ERP or registration/transaction system. Major parties such as Bol.com, Marktplaats, Amazon, and eBay offer sales opportunities. The same applies to Facebook and Google. But it is up to you to seize the opportunities that arise, because with an entrepreneur the glass is always half full, right?

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